Closed up 485 or 4.7% on revived bailout hopes and a plan to increase FDIC insurance from $100K to $250K. This move will help banks struggling under the weight of withdrawals as wealthy customers run for cover.

But just be aware, in case you are wondering why the sky hasn’t collapsed, that the fallout from this crisis will be spread over months and years. The stock market has not yet truly reacted to, or priced in, the ramifications (except in financial stocks) of this meltdown (weakened consumer spending, consumer debt default, negative growth, inflation, unemployment, etc.) Never mind the still to be revealed depths of the CDO / CDS quagmire hidden on balance sheets everywhere.

I can’t predict how low the market will go, but Dow 9000 (or lower) doesn’t seem at all far fetched (in fact, I guarantee it).

And there still needs to be some kind of government backstop (in order to get credit markets open again or else someone big is going to miss a payroll soon).

So no matter what, we’re going to be eating a crap sandwich. It’s just a matter of which flavor.

The events of the last few weeks seem in particular to have helped move independents into the Obama camp. Three weeks ago the candidates were tied, now Obama has a 48-40 advantage with those voters.

Perhaps the most important development for Obama’s prospects in the state is significantly improved standing with white voters. Where John McCain had a 27 point advantage with them right after his party’s convention, that is now down to 11 points.

Another factor that could be hurting John McCain is the rapidly declining popularity of Sarah Palin.

The italics are mine. I know the economic meltdown and John McCain’s erratic response to it is helping Obama, but I believe Americans are finally coming to understand how frighteningly unqualified Sarah Palin is.

Voters have children. Voters love their country.

You cannot, in good conscience, vote for Sarah Palin if that is the case.

New York Mayor Michael Bloomberg will announce his candidacy for a third term, despite existing term limits, on Thursday. From the New York Times:

After months of speculation about his political future, Mayor Michael R. Bloomberg plans to announce on Thursday morning that he will seek a third term as mayor, according to three people who have been told of his plans.

The extraordinary move promises to upend New York City’s political world.

Right now, Mr. Bloomberg is barred by law from seeking re-election. But he will propose trying to revise the city’s 15-year-old term limits law, which would otherwise force him and dozens of other elected leaders out of office in 2009, the three people said.

I am absolutely in favor of revising the law and support Bloomberg’s candidacy.

Here is the most important fact underlying the economic meltdown: Home prices continue to decline. The S&P/Case Shiller composite index showed prices dropped nearly 1% from June to July.

Until the housing market finds a floor, we will not be able to turn things around. And there are still more declines to come before housing prices return to their historical trend. (Click on the link and follow the red line back along the trend line. The median home price should be in $100,000 to $150,000 range. The National Association for Realtors shows the national median existing-home price for all housing types was $203,100 in August, down 9.5 percent from a year ago when the median was $224,400.)